March 28, 2012

India's soy area likely to rise around 10% this season

As record prices will likely encourage more plantings, India's soy area may rise as much as 10% this summer season, which could help the world's largest edible oils importer reduce a domestic shortage, industry executives and analysts said Tuesday (Mar 27).

Local soy prices have jumped about 30% over the past year and were quoted at INR3,029 (US$59.5) per 100 kilogrammes on the National Commodity and Derivatives Exchange on Tuesday, following concerns over a smaller South American crop.

"First time in history farmers [in India] are getting such prices. So definitely they will show more interest to cultivate soy," said Chowda Reddy, senior analyst with JRG Wealth Management.

He said there is potential for prices to move up to INR3,400-3,500 (US$66.8-68.8) per 100 kilogrammes during the sowing period in June. The crop is harvested by October.

Soy, India's biggest oilseed crop, accounts for more than 60% of the total summer-sown oilseed production. The total area planted with soy was about 10 million hectares last season and production was estimated at 10.65 million tonnes, according to industry estimates.

Poor returns from cotton could prompt farmers to switch to soy, said Satnarain Agarwal, president of the Central Organisation for Oil Industry & Trade.

In the past year, cotton prices have fallen more than 40% to INR34,000 (US$668) per 356 kilogrammes due to a bumper crop in 2011-12.